On January 1, 2013, NewTune Company exchanges 15,000 shares of its common stock for all of the

Question:

On January 1, 2013, NewTune Company exchanges 15,000 shares of its common stock for all of the outstanding shares of On-the-Go, Inc. Each of NewTune's shares has a $4 par value and a $50 fair value. The fair value of the stock exchanged in the acquisition was considered equal to On-the-Go's fair value. NewTune also paid $25,000 in stock registration and issuance costs in connection with the merger.

Several of On-the-Go's accounts have fair values that differ from their book values on this date:

______________________________________Book Values _________Fair Values

Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 65,000......................... $ 63,000

Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,000......................... 225,000

Record music catalog . . . . . . . . . . . . . . . . . . . . 60,000......................... 180,000

In-process research and development . . . . . . . . -0-......................... 200,000

Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . (50,000)........................ (45,000)

Precombination January 1, 2013, book values for the two companies are as follows:

___________________________________NewTune _________ On-the-Go

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 60,000....................... $ 29,000

Receivables . . . . . . . . . . . . . . . . . . . . . . . . . 150,000......................... 65,000

Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . 400,000......................... 95,000

Record music catalog . . . . . . . . . . . . . . . . . 840,000......................... 60,000

Equipment (net) . . . . . . . . . . . . . . . . . . . . . 320,000........................ 105,000

Totals . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,770,000..................... $ 354,000

Accounts payable . . . . . . . . . . . . . . . . . $ (110,000)..................... $ (34,000)

Notes payable . . . . . . . . . . . . . . . . . . . . . . (370,000) ..................... (50,000)

Common stock . . . . . . . . . . . . . . . . . . . . . (400,000) ....................... (50,000)

Additional paid-in capital . . . . . . . . . . . . . (30,000) ..................... (30,000)

Retained earnings . . . . . . . . . . . . . . . . . . . (860,000) ..................... (190,000)

Totals . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,770,000).................. $(354,000)

a. Assume that this combination is a statutory merger so that On-the-Go's accounts will be transferred to the records of NewTune. On-the-Go will be dissolved and will no longer exist as a legal entity. Prepare a post combination balance sheet for NewTune as of the acquisition date.

b. Assume that no dissolution takes place in connection with this combination. Rather, both companies retain their separate legal identities. Prepare a worksheet to consolidate the two companies as of the combination date.

c. How do the balance sheet accounts compare across parts (a) and (b)?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...